10.3 Current Transfer of Climate Change Mitigation Technology

10.3.1 Current energy supply technology transfer

Energy supply technology transfer in the past
Current pathways and actors of energy technology differ substantially from historical
patterns. In the 1950s and 1960s large scale power projects and rural electrification
schemes financed by multilateral banks and operated by national public monopolies
dominated the electricity sector, while the international oil and gas companies
ruled over the exploration, development and production of hydrocarbons. Technology
transfer was in fact a euphemistic term for large-scale public investments based
on foreign technology and soft loans with minimal knowledge transfer and domestic
capacity building. The oil crises of the seventies caused a revolution by stimulating
the domestic search for oil substitution and shifting interests from supply side
issues to demand side issues. The international oil and gas companies now had
to negotiate with demanding governments of exporting nations and their emerging
national oil companies. Requirements for training of local talent and purchasing
of domestic equipment were increasingly included in new contracts. At the same
time new ventures in small-scale renewable technology and energy conservation
began to influence views on technology transfer. The incentives for large-scale
hydro and nuclear were weakened due to environmental and social concerns. Technical
assistance, including training and R&D activities, became a standard component
of project financing by multilateral agencies. The emphasis gradually shifted
from isolated hardware package deals to more integrated, process-oriented approaches
including proper incentive structures for relevant actors. Moreover, at the same
time it became clear that the diversity among developing countries was growing
fast in terms of economic development potential and technological absorption capacity,
which implied a growing divergence in the needs for technology transfer in the
developing world.

Energy supply technology transfer in transition
In the early 1990s a second revolution followed when processes of market globalisation
accelerated and energy demand growth in the industrialised countries remained
low. The availability of private capital on a global scale increased greatly and
competition between global vendors of technology became intense. In addition,
market restructuring through liberalisation and privatisation spread from the
industrialised to the developing world. This restructuring process will ultimately
affect the role of government in guiding technology transfer in a major way. At
the same time, the strong growth of energy demand in some parts of the world increased
the range of potentially profitable technologies of interest to developing countries.
At low levels of demand it does not pay to build complex refineries and long-distance
pipelines. These changes are also affecting the traditional actors on the global
energy scene, in particular multilateral banks and oil and gas multinationals,
who are no longer concentrating on their traditional roles. Multilateral banks
are keen on diversifying their portfolios of energy supply projects and have included
environmental objectives besides traditional economic goals (see also Section
5.2). Special funds such as the Global Environmental Facility (GEF; see Box
5.2 in Chapter 5) have been created. Oil and gas multinationals
are venturing outside their traditional domain of hydrocarbon development and
production, and are involved in power projects and renewable energy technologies.
They now share the global stage with major equipment vendors, emerging domestic
firms, private financing institutions, independent project developers and major
energy clients.

From a policy perspective these changes have important consequences. In today's
dynamic market environment government policy on the level of specific technologies
and isolated actors is no longer very effective and could even be detrimental.
It is becoming more and more difficult to pick specific winners and losers. While
formerly governments played an active role as recipients in the technology transfer
process, they now concentrate more and more on regulating the rules of the game
and promoting enabling policies of a general nature. This involves more attention
for the proper economic incentives, the technological consequences of trade regulations
and the legal aspects of innovation policies. They are now keen on facilitating
technology transfer in general through creation of an adequate institutional infrastructure
with high quality engineering education, promotion of R&D activities, adequate
industrial standards and flexible market intermediation services.

Climate change and energy supply technology transfer
Current energy supply technology transfer is primarily driven by objectives of
economic development and international competitiveness. Climate change objectives
and in particular the reduction of CO2 emissions
do not play a significant role. This does not imply that energy supply technology
transfer has no effect on climate change, but that such effects are coincidental
rather than intended. This situation could change in the next few years because
of the binding commitments for industrialised countries and CEITs under the Kyoto
Protocol, and also because of the opportunity to use, in addition to the measures
implemented domestically, the provision for the flexible mechanisms under the
protocol. At the Buenos Aires Fourth Conference of Parties (CoP4)
further steps were agreed upon towards implementation of these instruments. Article
6 of the Kyoto Protocol allows for Joint Implementation (JI) projects among Annex
I Parties (developed countries), which implies that emission reduction units from
specific projects can be transferred between countries. Article 17 allows opportunities
for international emission trading among Annex I Parties. These mechanisms could
be of major interest to CEITs in Eastern Europe. Finally, Article 12 defines the
new Clean Development Mechanism (CDM) as a multilateral mechanism to assist Non-Annex
I Parties (developing countries) in achieving sustainable development while allowing
Annex I Parties to comply with their reduction commitments3
. The intentions of the CDM instrument are particularly relevant for initiatives
in the energy supply sector of developing countries, and raise the question how
energy supply technology transfer can be guided in a direction which will both
enhance economic development and reduce potential CO2
emissions. For this purpose it is useful to concentrate on the technologies which
are inherently beneficial from both the economic and climate change perspective
Section 10.2. has already discussed the categories of technology
options as presented in the IPCC TP1 and listed in Table
10.2. The six categories distinguished include: efficiency improvement, switching
to low-carbon fuels, removing and storing CO2,
nuclear power, biomass resources and small-scale renewables.